The Eurozone crisis continues to worry investors, and a combination of factors contributing to greater volatility is sparking investor interest in the Middle East region and Islamic bonds in particular, says Nigel Dennison, head of markets and asset management at the Bank of London and The Middle East (BLME).
The BLME is an independent wholesale Sharia’a-compliant bank based in London. It received Financial Services Authority authorisation in July 2007 and is the largest Islamic bank in Europe.
Dennison said fears of Greece’s euro exit continue to make headlines; the market is wary of President Francois Hollande’s plans in France and the country’s limited domestic growth from Q1. The downgrade of 26 Italian banks by ratings agency Moodys has also highlighted contagion fears.
The attraction of Sukuk is partly due to investors looking for alternative investments and turning to the Gulf region as a safe haven from the ongoing volatility in Europe, he noted. But they are also drawn by the “consistent and positive performance in the Sukuk market”.
“We expect to see a significant number of Sukuk issuances before the end of June as issuers take advantage of current high demand before the summer slowdown and the beginning of Ramadan in July,” said Dennison.
“IDB are looking to issue a £750-£1bn Sukuk in June. This will be positive news for the market as it is the only AAA rated Sukuk, which will lead to it being significantly oversubscribed.
"We also anticipate issuance from EIB, DIB and Banque Saudi Fransi, who are likely to issue a Sukuk this week. This will be the first Saudi bank to issue Sukuk, and given its scarcity, we anticipate that demand for this particular Sukuk will be high."
He expects future Sukuk issuances to be over-subscribed and the yields at which they are issued to be low.
Today on Investment Europe
Mark Phelps, head of Concentrated Global Growth at AB, will join InvestmentEurope's Pan-European Fund Selector Summit in Hamburg.
Richard Halle and Daniel White are set to take part in the InvestmentEurope Autumn Pan-European Fund Selector Summit, which takes place in Hamburg 15-17 October.